Ericsson in talks with Indian telecom operators to introduce wholesale network-sharing model

Telecom Lead India: Wireless equipment major Ericsson
is in talks with Indian telecom operators to introduce its wholesale
network-sharing model.

The utilization of a wholesale network-sharing model will assist mobile
operators to unlock added value for all stakeholders involved. The wholesale
model is likely to play an important role as network sharing evolves in India.

We are discussing the new model with operators in India and
abroad,” Valter Davino, vice president and head of Managed Services at
Ericsson  told
Telecom Lead during Mobile World Congress 2012.

However, he declined to divulge further details.

The new concept will be more valid when the operators /
industry construct a Greenfield project like 4G in India. For instance, the
upcoming 4G network can be owned by a company and network can be shared by a
number of operators. (pls see diagram)

Typically an operator can achieve further asset reductions
of up to 20 percent and increased cash flow of about 8 percentage points compared
with a traditional sharing model.

Ericsson believes that markets with spectrum and license
shortages or those that face the greatest financial pressure will be the first
to implement wholesale models.

All operators are under pressure to improve EBITDA margins.
Despite posting 17.1 percent increase in consolidated income in Q3 FY
2011-12 to Rs 18,477 crore, higher tax provisions impacted Airtel’s net
income to nosedive by 22 percent to Rs 1,011 crore in Q3 from Rs 1,303 crore in
the corresponding quarter previous fiscal.

Airtel profit decreases 22% in Q3 2011-12

Consolidated EBITDA margins for the quarter increased to
32.2 percent. Margin in Africa improved to 26.7 percent in Q3 FY 2012 from 19.1
percent in Q3 FY 2011.

Ericsson is poised to take a lead role by introducing the
new concept.Globally Ericsson has already signed more than
300 managed services contracts in more than 100
countries. Ericsson manages networks on behalf of operators that
serve over 850 million subscribers worldwide. In 2011, the telecom equipment
major signed 70 managed services deal.

In 2012, mobile service provider Idea Cellular signed an
agreement with Ericsson to handle managed services in five circles such as
Mumbai, Jammu & Kashmir, Himachal Pradesh, North East, and Assam.

Ericsson signs deal with Idea Cellular to power managed
services in five telecom circles in India

Ericsson had signed its first managed services deal with
Idea Cellular in 2007. The new agreement enables Ericsson to handle five
circles from the earlier one circle.

According to Ericsson, the wholesale network-sharing model
can deliver significant benefits, including: larger opex and capex efficiencies
than those possible in other network-sharing models through economies of scale
and efficient asset utilization; the opportunity to free up cash from existing
assets and to improve cash; and flow by linking costs to revenues to a higher
degree.

The other benefits of wholesale network-sharing model
include: a less complex governance structure, making it possible for the
network to remain independent and for operators to avoid sharing their plans.

However, realizing the wholesale network-sharing model will
require joint efforts and contributions from all industry players: operators,
investors, vendors and regulators.

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